Despite IMF's Declining Global Growth Forecast, Corporations Have Growth Confidence in Asia Pacific Region

Despite IMF's Declining Global Growth Forecast, Corporations Have Growth Confidence in Asia Pacific Region

Commercial News » Commercial Real Estate Edition | By Michael Gerrity | September 30, 2011 8:30 AM ET

According to a recent executive poll from Jones Lang LaSalle, corporate tenants gave Asia Pacific a vote of confidence with 79% predicting either increased (43%) or stabilized (36%) headcount in the region over the coming quarter.

Jones Lang LaSalle polled participants from 16 countries in three regions during a recent webinar and the responses are evidence that Asia Pacific will continue to fare better through the current economic volatility.

Jeremy Sheldon, Managing Director of Markets for Jones Lang LaSalle said, "Despite the IMF revising global growth forecasts downward last week, occupiers are maintaining their activity in the region, which reflects the IMF forecasts of 6.2% growth for Asia in 2011 and 6.6% in 2012."

According to the poll, more than one third (36%) of companies operating in Asia Pacific are focusing their real estate strategies in the coming year on Tier 1 emerging markets, such as Shanghai or Mumbai.

The trend is driven by US-based companies, with the majority (67%) saying that any new activity would be focused on the Tier 1 markets.

Those with their headquarters in Asia Pacific are more likely to focus on established regional centers such as Singapore and Hong Kong (43%) and companies based in EMEA are focused evenly on Tier 1 markets, regional centers, and Tier 2 cities.

"These results are very much in line with the pattern of economic growth that we are expecting in the region and support our expectation that 2012 will see continued take up across the region and that vacancies may fall as a consequence," said Mr Sheldon.

At the same time, economic volatility means that flexibility is high on the agenda, especially for US-based companies with 60% saying they would be more willing to pay for added flexibility in lease terms today than 12 months ago. In contrast, 75% of companies domiciled in Asia Pacific expect to pay the same, while 13% of all respondents said that are less willing to pay for added flexibility.

"Flexibility is key to survival in uncertain times and companies need to find cost effective ways to add flexibility to their leases," said Mr Sheldon

"What we have seen in the last two market cycles is landlords offering concessions that limit rental growth as a way to attract occupiers. We have also witnessed a continued move by occupiers moving certain support operations from tightly-held CBD locations, as in Hong Kong and Singapore, to suburban locations in order to benefit from rental stability and higher levels of available stock," he said.

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